IMF Working Papers

Collateral Reuse and Balance Sheet Space

By Manmohan Singh

May 8, 2017

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Manmohan Singh. Collateral Reuse and Balance Sheet Space, (USA: International Monetary Fund, 2017) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Transactions on wholesale capital markets are often secured by marketable collateral. However, collateral needs balance sheet space to move within the financial system. Certain new regulations that constrain private sector bank balance sheets may have the effect of impeding collateral flows. This may have important consequences for monetary policy transmission, for short term money market functioning, and for market liquidity. In this context (and in contrast to the literature, which has focused mainly on the repo market), this paper analyzes securities-lending, derivatives, and prime-brokerage markets as suppliers of collateral. It highlights the incentives created by new regulations for different suppliers of collateral. Moreover, it argues that the central banks should be mindful of the effect of their actions on the ability of markets to intermediate collateral.

Subject: Banking, Central bank balance sheet, Central banks, Collateral, Financial institutions, Financial statements, Hedge funds, Public financial management (PFM), Securities

Keywords: Central bank balance sheet, Collateral, Collateral velocity, Dealer bank, Financial statements, Global, Hedge funds, Market liquidity, Market participant, Market plumbing, Market practice, Market volatility concern, Nonbank intermediation, OTC derivatives, OTC derivatives market, Prime brokerage, Repo, Repo market, Reverse repo, Securities, Securities lending, TPR market, WP

Publication Details

  • Pages:

    29

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2017/113

  • Stock No:

    WPIEA2017113

  • ISBN:

    9781475599343

  • ISSN:

    1018-5941

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